Pressure grows on automakers: electric cars must become greener

Pressure grows on automakers
Electric cars should become greener

There is still a long way to go before electric car manufacturers ban environmentally harmful materials from their supply chains. It’s not just battery construction that causes developers headaches. This creates new opportunities for companies that do business with sustainable raw materials.

An electric vehicle should be significantly more environmentally friendly than a conventional gasoline engine, right? Well, the reality is a bit more complicated. From motor magnets with toxic byproducts to batteries that require vast amounts of fossil-based electricity to produce, electric vehicle manufacturers still face a host of challenges in their quest to remove polluting materials from supply chains.

It’s not just the energy-intensive build of car batteries that gives developers headaches. The material used is also considered unsustainable, especially the so-called rare earths, which often come from China, where they are produced with polluting chemicals. Pressure from regulators and investors is forcing automakers to rethink. This creates opportunities for companies that perceive business from the demand for raw materials and sustainable processes. Take British motor maker Advanced Electric Machines (AEM), for example, which is working with luxury brand Volkswagen Bentley, among others, to develop rare-earth metal-free electric motors.

The main problem remains carbon-intensive manufacturing

“Our customers need cost-effective and sustainable ways to replace internal combustion engines without having to fill their cars with tons of this nasty rare-earth material,” says James Widmer, director of British engine maker Advanced Electric Machines (AEM), the I develop the point. Other companies like Israel’s Addionics are looking at the battery and how to make it cleaner. Investors are paying more attention to environmental aspects, says Moshiel Biton, head of Addionics. “But that’s nothing compared to what’s to come.” So-called ESG goals are playing an increasingly important role for investors.

Companies must not only make profits, but also take into account the protection of the environment (environment), social aspects (social) and responsible business management (government). Makram Azar, director of London-based investment firm Full Circle Capital, says raising capital is easier for those who meet all the ESG requirements. There are not enough ESG-compliant companies for the large sums that asset managers have ready for such investments. For example, Full Circle has invested in the British startup Britishvolt. The company is currently building a battery system for electric vehicles that will run exclusively on renewable energy.

Automakers are not fast enough

The main problem with electric cars remains their carbon-intensive output: they have to drive thousands of miles before they are less polluting than their gas-guzzling counterparts. In particular, the production of batteries requires a lot of energy because the work is done at high temperatures and a lot of aluminum is used. For automakers, this also means taking the supply chain into account. “We only enter new business with suppliers that have a net-zero emissions plan,” explains Andy Palmer, chief executive of British electric car maker Switch Mobility, which belongs to Indian commercial vehicle group Ashok.

Automakers are moving in the right direction, says Costa Caldis, chief operating officer at supply chain specialist SAFE. But this is not fast enough. “Stakeholders are demanding transparency in the supply chain and not just explanations.” Reducing carbon emissions in the supply chain is an important part of BMW’s corporate strategy, stresses Thomas Becker, head of sustainability at the Munich-based company. BMW has agreed with all of its battery suppliers and many of its steel and aluminum suppliers that its materials can only be made from renewable energy, Becker told a conference in London in March.

Pressure on automakers continues to mount

According to BMW, the CO2 footprint was twelve tons per vehicle in 2019. With BMW’s new emission reduction plans, this value should drop to nine tons by 2030. Previous sustainability efforts by companies are often derided as vague or as “greenwashing”, that is, pure public relations measures. Switch, for example, buys carbon credits to offset the carbon used to make metal components, says Palmer.

However, these certificates are criticized by activists because, in their view, the transnational emissions market leads to a fundamental antagonism between certificate trading and national climate protection measures. If greenhouse gas emissions become a tradable commodity, pollution will be legitimized to some extent: those who can afford it can continue to “sin” and simply “greenwash” with certificates. Therefore, the pressure on automakers is likely to continue to mount.

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